If the government decides to levy an ad valorem tax on product with a perfectly inelastic supply.The consumers tax incidence will be

Question

Quizplus · Accepted Answer

In a perfectly inelastic supply, the producer cannot or will not change the quantity supplied at any given price, which means that the consumers will bear the entire burden of the tax. Therefore, the tax incidence on consumers will be 0.

If the Government Decides to Levy an Ad Valorem Tax